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Luxury goods group Kering joined competitors in defying concerns of waning demand in China, as momentum at its powerhouse Gucci slowed slightly in the fourth quarter but still outperformed most other fashion brands.

Like its peers, Paris-based Kering, which also owns Saint Laurent and Balenciaga, has been under scrutiny over whether demand among Chinese shoppers, who account for over a third of industry sales, can hold up.

The firm’s comparable sales rose a higher-than-expected 24.2 percent in the October to December period, when stripping out currency swings and acquisitions, and were up 24.5 percent on a reported basis to 3.8 billion euros ($4.29 billion).

“Sales among our Chinese clientele remained very dynamic in the fourth quarter, even with a high comparative base,” Financial Director Jean-Marc Duplaix told journalists on Tuesday, adding that spending by these customers had shifted from overseas to mainland China.

The group’s Italian label Gucci held on to its crown as one of the luxury world’s fastest-growing brands. Comparable sales growth of 28.1 percent in the fourth quarter marked a slowdown from the previous three months but far exceeded that of rivals, while margins reached a record 39.5 percent in 2018.

Gucci’s might – with annual sales of 8.3 billion euros putting it neck and neck with privately-owned Chanel behind LVMH’s Louis Vuitton as the top luxury label by sales – has raised questions about Kering’s reliance on the label.

It accounted for over 80 percent of the group’s operating income in 2018.

Gucci has also been in the spotlight over a tax investigation in Italy, where Kering faces a potential 1.4 billion euro bill for allegedly avoiding tax on earnings generated by the Italian label and billed to a Swiss subsidiary.

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Economist says tycoons ‘are the problem’

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As protests continue to roil Hong Kong, a widely followed economist has an idea about how to ease tensions: China, he said, needs to take power away from the city’s tycoons and fix its property market.

The east Asian financial hub has been rocked by civil unrest in recent months with operations of Hong Kong International Airport severely disrupted this week due to a sit-in by protesters. The ongoing demonstrations in the city started as peaceful rallies against a single proposed law but have snowballed into a wider pro-democracy movement, with some even demanding full autonomy from Beijing and occasional outbreaks of violence.

Social discontent with stratospheric housing prices is playing a major part in the unrest, Andy Xie, an independent economist, told CNBC’s “Squawk Box” on Wednesday.

“Hong Kong has been a pressure cooker for a long time,” he said.

According to the Centa-City Leading Index, a widely used indicator of the city’s residential price trends, property prices have appreciated over 300% since 2003 when they tanked due to a disease epidemic.

But wages have largely stagnated in the same period, so “it’s very difficult to see how young people can feel hope. They know they’ll never be able to afford a place, so they cannot start a family. How can they get ahead in life? Desperation, and really a deep sense of unhappiness, is driving this unrest,” said Xie.

Xie’s comments come just as business leaders are coming out to voice their stand as protests start to take a toll on the Hong Kong economy.

On Sunday, property tycoons in Hong Kong issued a joint petition to newspapers calling on the public to cease illegal protests and allow the return of stability, the South China Morning Post reported.

CITIC Capital CEO Zhang Yichen, meanwhile, posted a notice appealing for the restoration of law and order in Hong Kong on his WeChat social media account on Wednesday. The notice urges support for the Hong Kong government and police. CITIC Capital is the alternative investment arm of Chinese financial conglomerate CITIC Group.

Last year, global chairty network Oxfam flagged a “particularly severe” wealth disparity in Hong Kong, which it said was the highest among all developed countries and regions.

Hong Kong is the world’s most expensive city to buy a home, according to another report released in April.

Xie attributed the sky-high property price to the housing market being lead by local business leaders.

“The Hong Kong government is not really in charge (even though) most people think that they need to listen to Beijing, but perhaps more importantly, they are really influenced by the big property tycoons,” said Xie.

Although the Hong Kong authorities have changed housing policies several times, “in the end, they favor tycoons, giving the land to the tycoons,” the economist asserted.

But private developers “hold the land, not building much and they just try to squeeze the market and push the prices as much as possible,” he said.

Xie said real estate developers benchmark their prices against the salaries and big bonuses of those who work in the financial sector, but that has priced out the vast majority of the local population.

“For ordinary people, you make an income about 5% of a financial guy and they think you should get 5% of an apartment, so they create something like a ‘nano flat,'” he said, referring to tiny apartments in Hong Kong that can be the size of a parking space. “That is really crazy.”

“They think that people will just take it lying down forever, (but) eventually, it blows up,” said Xie, who was a former chief Asia-Pacific economist at Morgan Stanley.

“The key is that the political structure here is neither the Singapore situation where the government is on top, nor like Taiwan (where) it’s a democracy and people can vote,” said Xie, who recently penned an opinion piece in the South China Morning Post on the subject.

Hong Kong is “in between — just a bunch of business people calling the shots,” he added.

Beijing needs to distance itself from the tycoons in Hong Kong, said Xie.

“Every time, there’s a disturbance in Hong Kong, Beijing goes to these business guys for advice; you know something’s very wrong,” said Xie. “These guys are causing the trouble in Hong Kong, why are you going to them for advice every time?”

“They are the problem; they need to become regular business people, not having political power (and) running the place,” said Xie.

In response to CNBC’s request for comments on Xie’s comments, the Real Estate Developers Association of Hong Kong said through its public relations agency that it “doesn’t have any comments to share at this point.”

—CNBC’s Penny Chen contributed to this report.

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PBOC sets RMB midpoint at 7.0268 per dollar

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A Chinese bank employee counts 100-yuan notes and US dollar bills at a bank counter in Nantong in China’s eastern Jiangsu province on August 6, 2019.

STR | AFP | Getty Images

China’s official midpoint reference for the yuan was set at 7.0268 per the U.S. dollar on Thursday — stronger than Wednesday’s fixing, but it was weaker than what analysts had forecast.

Analysts were predicting the midpoint to be set at 7.0236 per dollar, according to Reuters estimates.

It was the sixth consecutive session where the People’s Bank of China (PBOC) fixed the midpoint at a level weaker than the psychologically important 7-yuan-per-dollar mark.

The onshore yuan last traded at 7.0250. On Thursday morning around 9.24 a.m. HK/SIN, the offshore yuan traded at 7.0518 against the dollar, weakening again after the yuan rebounded overnight on Tuesday — with U.S. President Donald Trump backing off on China tariffs.

The yuan depreciated past 7 per dollar last week for the first time since the global financial crisis of 2008, which prompted the U.S. Treasury Department to designate China as a currency manipulator.

Trump has repeatedly complained that a cheaper yuan will give China a trade advantage as it makes Chinese exports more attractive in international markets.

The PBOC lets the currency’s spot rate trade with a range of 2% above or below the day’s official midpoint fix and this is known as the onshore yuan. The less restrictive exchange rate used outside mainland China is known as the offshore yuan.

Investors usually look at the difference between the onshore and offshore exchange rates to determine if the Chinese central bank is manipulating the yuan.

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Cathay Pacific says it fired two pilots over Hong Kong protests

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A Hong Kong Express Airways and Cathay Pacific Airways aircrafts at Hong Kong International Airport.

Paul Yeung | Bloomberg | Getty Images

Cathay Pacific has terminated the employment of two pilots, the company said on Wednesday, after it suspended them in the past week over their involvement in protests in Hong Kong.

“In response to media inquiries, Cathay Pacific confirms that two pilots have been terminated in accordance with the terms and conditions of their employment contracts,” the Hong Kong-based airline said in an e-mailed statement.

“One is currently involved in legal proceedings. The other misused company information on Flight CX216/12 August. Cathay Pacific wishes to make it clear that we express no view whatsoever on the subject matter of any ongoing proceedings,” it said.

China’s aviation regulator last week demanded Cathay suspend personnel who engaged in illegal protests in the city.

The airline later moved to suspend a pilot who was among more than 40 people charged with rioting for allegedly taking part in violent clashes with police near Beijing’s main representative office in Hong Kong.

It suspended a second pilot on Tuesday.

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